EU to Google: Settle or Be Charged with Antitrust Violations

A lot has changed with antitrust regulators in the European Commission (EC) since they took Microsoft to court again and again to answer for its predatory practices in the desktop OS market. Now, facing online advertising giant Google, the European Union (EU) is trying a different, more expedient tactic: It's offering Google the chance to settle before announcing sweeping antitrust charges against the firm.

“I offer Google the possibility to come up in a matter of weeks with first proposals of remedies to address each of the … four concerns where Google business practices may be considered as abuses of dominance,” EC Vice President Joaquín Almunia said in a Monday morning press conference. “If Google comes up with an outline of remedies which are capable of addressing our concerns, I will instruct my staff to initiate the discussions in order to finalize a remedies package … Should this process fail to deliver a satisfactory set of remedies, the ongoing formal proceedings will of course continue.”

Those formal proceedings would include a so-called Statement of Objections, which is EU-speak for a formal declaration of charges that will result in the imposition of fines and remedies—and years of legal battles.

According to Almunia, the EU has discovered four areas of concern with Google. These include:

1. Google Search provides “preferential treatment” to Google vertical search services over those of the competition and it does so in a visually differentiated way. “Vertical search services … focus on specific topics, such as restaurants, news, or products,” the regulator noted, and Google operates several of these services.

2. Google copies content from competing vertical search services and uses it in its own offerings. This includes “copying original material from the websites of its competitors such as user reviews and using that material on its own sites without their prior authorization.” Google is “appropriating the benefits of the investments of competitors,” Almunia said.

3. Google’s advertising terms require partners—those companies that display Google ads on their own websites—to “obtain all or most of their requirements of search advertisements from Google, thus shutting out competing search advertising providers.”

4. Google restricts advertisers from moving online search advertising campaigns from Google’s adWords system to competing platforms. “Google imposes contractual restrictions on software developers which prevent them from offering tools that allow the seamless transfer of search advertising campaigns across AdWords and other platforms for search advertising,” the EU claims.

Almunia says he has sent a letter to Google Chairman Eric Schmidt outlining the EU complaints and giving the company a “matter of weeks” to come up with appropriate settlement terms. This tactic is sharply different from that used against Microsoft: In a series of wide-ranging cases, the EU seemed compelled to announce new charges against the software giant at the drop of a hat, and the EU and Microsoft spent the better part of several years battling in court over topics as diverse as OS licensing on computers, web browsers, media players, document formats, developer documentation, and more. These cases severely undercut Microsoft’s ability to compete and resulted in the gutting of its core product, Windows.

With Google, the EU appears to be acknowledging that such action can often take too long to implement, given the quick-moving technology market. By the time the EU’s many cases against Microsoft were finally winding down, its competitors had destroyed the market share of Microsoft’s media player and web browser products, and even the company’s dominant Windows was facing new threats from mobile devices based on Apple and Google technologies.

This change of heart could help Google avoid a lengthy and embarrassing series of court appearances in Europe, assuming that the company is able to meet the needs of the EC regulators. Google appears to be seriously considering doing just that.

“We disagree with the conclusions, but we're happy to discuss any concerns they might have,” a Google statement notes. “Competition on the web has increased dramatically in the last two years since the Commission started looking at this, and the competitive pressures Google faces are tremendous. Innovation online has never been greater.”